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Canadian Stocks Decline as Federal Reserve Cites Economic Risks

Canadian stocks fell, led by energy and base-metals producers, after the U.S. Federal Reserve said “significant downside risks” remain to the economic recovery.

Teck Resources Ltd. (TCK/B), Canada’s largest base-metals and coal producer, lost 5.8 percent after two U.S. producers of coal used in steelmaking cut production and sales forecasts. Canadian National Railway Co. (CNR), the country’s largest railroad, decreased 4.3 percent as transportation companies retreated. Encana Corp. (ECA), the country’s largest natural gas producer, slid 4.2 percent as the fuel dropped.

The Standard & Poor’s/TSX Composite Index (SPTSX) slumped 254.87 points, or 2.1 percent, to 11,955.01, the lowest since Aug. 8, after the U.S. central bank said it will sell $400 billion in short-term Treasuries to fund the purchase of bonds with longer maturities.

“The market was probably expecting more, and people were hoping it was going to have a silver bullet,” Greg Eckel, a money manager at Morgan Meighen & Associates Ltd., said in a telephone interview. The firm oversees about C$1 billion ($1 billion). “There’s a growing realization that there isn’t one part that can be turned on to improve the situation near-term.”

Canada’s benchmark stock gauge is set to retreat for the seventh straight month, the longest streak since 1984. It has slipped 6.4 percent this month, with energy stocks pulling the measure lower as oil and natural gas fell on concern the global recovery is at risk.

Alpha Natural Resources Inc. cited reduced coal demand from Asian steel mills as one reason for the cut to its coal-shipment forecast. Walter Energy Inc. reduced its sales estimate for the second half of 2011 by 12 percent.

Teck, Ivanhoe Mines

Base-metals and coal producers in the S&P/TSX dropped to the lowest since August 2010. Teck, which also produces coal for industrial use, declined 5.8 percent to C$34.03. SouthGobi Resources Ltd. (SGQ), which mines coal in Mongolia, tumbled 10 percent to C$8.05, the lowest since March 2009. Grande Cache Coal Corp., which operates in Alberta, sank 11 percent to C$6.13.

Ivanhoe Mines Ltd. (IVN), which is developing a copper and gold mine in Mongolia with Rio Tinto Group, slumped 9.5 percent to C$16.97 a day after the News.mn portal quoted Sangajav Bayartsogt, the country’s finance minister, as saying the government wants to revise the investment terms for the project.

First Quantum Minerals Ltd. (FM), which produces copper in Zambia, lost 6.4 percent to C$16.79 after early returns showed Michael Sata, who has called for mining companies to pay higher taxes, leading the country’s presidential elections. The shares have plunged 21 percent this week, the biggest decline in a three-day period since 2008.

Rails Retreat

The S&P/TSX Industrials Index fell to the lowest since July 2010 as the coal companies’ forecast cuts also led to retreats by railroad stocks. CN dropped 4.3 percent to C$65.65. Canadian Pacific Railway Ltd. (CP), the country’s second-largest railroad, declined 5.8 percent to C$47.88, the lowest price since November 2009.

Among other industrial companies, SNC-Lavalin Group Inc. (SNC), Canada’s largest construction company, lost 5.9 percent, the most since February 2009, to C$44.24. Air Canada, the country’s biggest airline, tumbled 10 percent to C$1.53, the lowest since March 2010.

S&P/TSX energy stocks retreated for a fourth day as natural gas futures fell to the lowest since October. Most analysts in a Bloomberg survey forecast the U.S. will report a larger-than-average increase in inventories tomorrow.

Encana fell 4.2 percent to a six-year low of C$21.74. Suncor Energy Inc., Canada’s largest oil and gas producer, slipped 2.6 percent to C$28.13. Cenovus Energy Inc. (CVE), the country’s fifth-biggest energy company, dropped 3.6 percent to C$31.49.

Rare-Earth

Neo Material Technologies, Inc., which makes rare-earth and zirconium products, sank 10 percent to C$7.44. World rare-earth companies have tumbled this week as prices for the materials used in electronics and magnets declined.

Potash Corp. of Saskatchewan Inc., the world’s biggest fertilizer producer by market value, decreased 2.6 percent to C$50.37 as corn and wheat futures retreated. Agrium Inc., a fertilizer producer and farm retailer, slipped 3 percent to C$79.36.

Seven of eight S&P/TSX insurance companies and all of the index’s banks declined. Manulife Financial Corp. (MFC), Canada’s largest insurer, lost 4.3 percent to a one-year low of C$11.91. Great-West Lifeco Inc. (GWO), its biggest domestic rival, decreased 2.1 percent to C$20.23. Canadian Imperial Bank of Commerce, the country’s fifth-largest lender by assets, slipped 2.1 percent to C$73.79.

To contact the reporter on this story: Matt Walcoff in Toronto at mwalcoff1@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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